Chongqing- Banks in China's five regions, including Chongqing, Henan, Sichuan, Xiamen, and Qingdao, will pilot a one-year trial on the use of railway transport documentation to offer financial services for foreign trade enterprises, according to a notice issued by the General Office of the China Banking and Insurance Regulatory Commission and the General Office of the Ministry of Commerce recently.
A rail transport document is a transport document used in rail shipments and confirms that the rail carrier has received the goods and that a contract of carriage exists between trader and carrier. By giving rail transport documents financial attributes, companies can use them to finance to ease capital pressure.
Growing cross-border trade asks for more financial support
In recent years, cross-border railway transport, such as the China-Europe Railway Express (CR Express), has developed rapidly. On June 30, the cumulative number of CR Express in Chengdu and Chongqing exceeded 20,000, becoming an important milestone in the history of CR Express across the country.
Banking and insurance institutions in regions have made financial innovations relying on the railway and multimodal transport documents, effectively supporting the development of foreign trade. Multimodal transport combines different means of transport to make transportation more efficient, and railways play an important part in this.
The China-Europe Railway Express (Chengdu-Chongqing) exceeded 20,000 on June 30, 2022. (Photo provided to iChongqing)
Thus, financial services relating to railway transport documents are an essential part of financial services for foreign trade. The financial services control risks, expand service coverage, reduce total financing costs for foreign trade enterprises, and further promote the development of cross-border trade.
Multilateral cooperation to promote financial innovation
According to the notice, pilot regions such as Chongqing will carry out projects from several aspects, strengthening banking services, enabling the application of technology, and maintaining risk prevention and control.
Banks will be encouraged to innovate financial service modes to strengthen banking services. Risk-controllable railway transport documents will be accepted for settlement and financing, providing foreign trade enterprises with services such as domestic and foreign currency settlement, letters of credit issuance, import and export trade financing, and supply chain finance.
Making innovations by reference to the financial service model under marine bills of lading, banks will take railway transport documents with controllable risks as acceptable documents for settlement and financing and provide foreign trade enterprises with services such as settlement in RMB and foreign currencies, opening of letters of credit, import and export trade financing, and supply chain finance.
Banks can cooperate with railway carriers, freight forwarders, warehousing, and logistics companies, to better use big data and blockchain technologies to achieve rapid transmission and verification of documents, innovate financial product services and prevent risk.
Also, insurance companies are encouraged to strengthen product innovation, expand the scope of services, and provide risk protection for goods transported by railway. They shall also support insurance companies in diversifying risks through reinsurance and other means.
This June, the China (Chongqing) Pilot Free Trade Zone (CFTZ) encourages the market entities, railway enterprises, and banks of CFTZ to explore the financing mode of railway transport documents in its 14th Five-Year Plan. Also, as Chongqing is striving to build the western financial center, this pilot program will add a strong impetus.
(Zhu Qinzhuo, as an intern, also contributed to this report.)